Internet address: http://www.bls.gov USDL 04-488
Technical information: (202) 691-5654 For Release: 10:00 A.M. EST
Media contact: (202) 691-5902 Friday, March 26, 2004
INTERNATIONAL COMPARISONS OF MANUFACTURING PRODUCTIVITY
AND UNIT LABOR COST TRENDS, REVISED DATA FOR 2002
In 2002, the increase in U.S. manufacturing productivity,
at 9.2 percent, was the largest among 14 economies
compared, according to revised data released by the U.S.
Department of Labor's Bureau of Labor Statistics. Except
for Italy, productivity also increased in all the other
economies, with gains of more than 6 percent in Sweden,
Korea, Belgium, and Taiwan. (See chart 1.)
The U.S. productivity growth in 2002 was substantially
above its 3.5 percent average annual growth rate since
1979. Six of the other 11 economies for which historical
comparisons are available also surpassed their 1979-2002
average annual rates of increase in 2002. (Average
annual growth rates for selected measures over various
time periods are found in tables A and B.)
PRINTED COPY CONTAINS CHART AT THIS POINT
Chart 1. Percent change in manufacturing output per hour,
2002
-2-
Unit labor costs in manufacturing, expressed in national
currency units, rose in 9 of the 14 economies in 2002,
with Korea recording the largest increase (+5.4 percent).
Spurred on by productivity gains, unit labor costs
declined in Taiwan (-6.1 percent) and in the United
States and Sweden (both by -4.1 percent). Canada had a
much smaller decline (-0.3 percent), while unit labor
costs in Germany were unchanged.
The general rise in unit labor costs in U.S. dollar terms
is explained primarily by the depreciation of the dollar
versus most other national currencies in 2002 and,
secondarily, by the fact that hourly compensation grew
faster than output per hour in most countries. Norway had
the greatest increase in unit labor costs in dollar terms
primarily because it also had the greatest increase in
the value of its currency versus the dollar. (See chart
2 and table A.)
PRINTED COPY CONTAINS CHART AT THIS POINT
Chart 2. Percent change in manufacturing unit labor costs, 2001-2002
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Table A. Output per hour, hourly compensation, unit labor costs, and related measures
Manufacturing, 14 countries or areas, 2001-2002
Percent change
Output Total Hourly Unit labor costs
Country per Total Employ- Average compen- compen- National U.S. Exchange
or area hour Output hours ment hours sation sation currency dollars rate (1)
United States 9.2 1.8 - 6.8 - 6.8 0.0 - 2.4 4.7 - 4.1 - 4.1 --
Canada 2.8 2.9 0.1 0.3 - 0.2 2.6 2.4 - 0.3 - 1.7 - 1.4
Japan 2.7 - 2.0 - 4.5 - 4.7 0.2 2.3 7.1 4.3 1.3 - 2.9
Korea 7.2 6.3 - 0.8 - 0.2 - 0.7 12.0 13.0 5.4 8.9 3.3
Taiwan 6.4 6.3 - 0.1 - 1.8 1.7 - 0.2 - 0.1 - 6.1 - 8.0 - 2.1
Belgium 6.8 1.0 - 5.5 - 3.6 - 2.0 1.5 7.3 0.5 6.1 5.6
Denmark 3.4 0.2 - 3.1 - 2.9 - 0.2 1.0 4.2 0.8 6.5 5.7
France 2.7 0.1 - 2.6 - 1.7 - 0.9 0.6 3.3 0.5 6.2 5.6
Germany 2.5 - 0.2 - 2.7 - 2.2 - 0.5 - 0.3 2.5 0.0 5.6 5.6
Italy - 1.4 - 0.7 0.7 0.9 - 0.2 3.1 2.5 3.9 9.7 5.6
Netherlands 0.5 - 1.6 - 2.2 - 2.2 0.0 2.8 5.1 4.5 10.4 5.6
Norway 1.8 - 0.6 - 2.4 - 1.1 - 1.3 3.5 6.0 4.2 17.4 12.7
Sweden 8.2 3.4 - 4.5 - 2.8 - 1.7 - 0.9 3.7 - 4.1 2.0 6.4
United Kingdom 1.0 - 3.5 - 4.5 - 5.0 0.5 - 1.2 3.4 2.4 6.9 4.4
(1) Value of foreign currency relative to the U.S. dollar.
Table A summarizes changes in manufacturing productivity,
unit labor costs, and related variables between 2001 and
2002.
This release examines comparative trends in the revised
figures for manufacturing output per hour, unit labor
costs, and related measures in 2002, the most recent year
for which comparative data are available, and for certain
selected time periods shown in table B (pages 7-11).
Additional data available
Annual index series of these data also are estimated for
the time period 1950-2002 and are available at the Bureau
of Labor Statistics, Division of Foreign Labor Statistics
website at address http://www.bls.gov/fls/home.htm.
Because the value added output data for U.S.
manufacturing industries are not available prior to 1977,
the comparative measures of output, output per hour, and
unit labor costs for the United States begin with 1977.
However, for analytical purposes, the international
comparisons in this release go back to 1979.
For further information, contact the Office of
Productivity and Technology by phone at 202-691-5654, by
e-mail at flspr@bls.gov, or by mail at Bureau of Labor
Statistics, 2 Massachusetts Avenue, NE, Room 2150,
Washington, DC 20212.
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Box: Notes about the measures
The measures in this release are based on data available to
BLS as of January 2004. Revisions for 2002 and earlier
years were made to the measures for several countries to
incorporate data not available at the time of the September
2003 report.
U.S. manufacturing output measure
The output measure for manufacturing in the United States is
the chain-weighted index of real gross domestic product by
industry (deflated value added), published by the Bureau of
Economic Analysis (BEA), U.S. Department of Commerce. This
series is based on annually changing price weights.
The U.S. real output data through 2001 used in this report
were released by BEA in November 2002 and are described in
the Survey of Current Business, November 2002. Real U.S.
output for 2002, for the first time, comes from the newly-
available BEA accelerated estimates of gross domestic
product by industry using an abbreviated methodology,
described in the May 2003 Survey of Current Business. The
regular BEA estimates, ordinarily available in November,
have been delayed until June 2004 because of a comprehensive
revision of the national income and product accounts. The
new accounts will be based on the North American Industry
Classification System (NAICS 2002), as opposed to the
current 1987 Standard Industrial Classification (SIC).
The change in U.S. manufacturing output for 2002, published
in the September 2003 news release, was estimated from the
Federal Reserve Board's Industrial Production Index for
Total Manufacturing. Use of the BEA preliminary output
estimate in the current release resulted in an upward
revision of U.S. manufacturing output growth, from a decline
of 1.1 percent to an increase of 1.8 percent.
The U.S. output series used for international comparisons
differs from the official manufacturing series that BLS
publishes as part of its major sector productivity and costs
measures for the United States. The international
comparisons program uses a value added output concept, while
the major sector series is on a sectoral output basis. See
Technical Notes section of this release for additional
information.
Canada
Data for Canada have been revised from 1997 forward because
of the introduction of the North American Industry
Classification System (NAICS 97). Data prior to 1997 have
not been converted from the Canadian Standard Industrial
Classification system (SIC 80). The two data series have
been linked in 1997.
Denmark
Statistics Denmark has published a new hours worked series
for employees from 1995 forward. No hours measure is
available for 1994. Thus no trends involving hours could be
calculated over time periods which include 1994.
Germany
German data pertain to unified Germany from 1991 onward and
to the former West Germany for prior years. The two data
series have been linked in 1991.
United Kingdom
The deflation method used for converting output in current
prices to output in real terms has been changed from a fixed
base-year to an annual chain-linked method, consistent with
the United Nations System of National Accounts (SNA 93)
guidelines.
END OF BOX: Notes about the measures
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Manufacturing productivity, output, and labor input
The growth in labor productivity (output per hour) in
U.S. manufacturing of 9.2 percent in 2002 was the highest
since the beginning of the current series in 1977,
surpassing the previous high of 8.0 percent in 1987. The
U.S. productivity increase in 2002 was followed by Sweden
(+8.2 percent), Korea (+7.2 percent), Belgium (+6.8
percent), and Taiwan (+6.4 percent). Italy's
productivity declined 1.4 percent, and the United
Kingdom’s gain of 1.0 percent and the Netherlands' gain
of 0.5 percent were the lowest among the economies
compared. In a majority of the economies, the 2002
productivity gains followed smaller productivity
increases or declines in 2001. Denmark, France, Italy,
Norway, and the United Kingdom, where labor productivity
growth slowed or declined in 2002, were exceptions. (See
table B.)
In the United States, Canada, Taiwan, and Sweden,
manufacturing output increased in 2002 following declines
in 2001. Only three of the other eight European
countries increased their manufacturing output, but by no
more than 1 percent. Manufacturing output fell in Japan,
but, unlike the European countries that experienced
declines, less than in 2001. Canada, Taiwan, and Sweden
were the only economies whose rate of increase in
manufacturing output was greater in 2002 than the average
annual growth since 1979. (See table B.)
Hours worked in manufacturing declined in 2002 in all the
economies compared, except Canada and Italy. In the
United States, hours worked fell by 6.8 percent in 2002,
the greatest annual drop in 20 years and the largest
among the economies compared. This was the second year
in a row of substantial declines in U.S. hours worked.
Other declines in 2002 ranged from 0.1 percent in Taiwan
to 5.5 percent in Belgium. In seven economies, these
declines in hours worked were accompanied by increases in
manufacturing output, leading in most cases to
substantial increases in productivity. In five other
countries, declines in manufacturing output were more
than offset by larger drops in hours worked, also
resulting in productivity gains. Canada’s productivity
increase was associated with an increase in output that
greatly surpassed the increase in hours worked. Italy’s
productivity downturn was related to a decline in output
that equaled the increase in hours worked. (See tables A
and B.)
The reductions in hours worked in manufacturing continued
a general trend during the last decades in the
manufacturing sectors of these economies. The only
exception to this general trend is Canada, where hours
rose 0.2 percent per year over the period since 1979. In
most of the other economies, hours worked in
manufacturing reached their maximum levels in the 1960s
and 1970s (the United States in 1979) and have trended
downward since then. Only two of the eight European
countries for which hours data are available experienced
smaller declines than in the United States over the
period 1979-2002. In Taiwan and Korea, manufacturing
hours have been declining since the late 1980s. In most
economies, the rate of decline slowed somewhat in the
second half of the 1990's, when compared to the 1990-1995
period. (See table B.)
For most countries, reductions in manufacturing hours
over the last several decades were the result of declines
in both manufacturing employment and average hours
worked. The reduction in average hours began earlier, but
the decline in employment has been steeper and steadier.
In the United States, Italy, and Sweden, average hours
have risen slightly since 1979. (See table B.)
-6-
The 2002 U.S. decline in manufacturing employment was the
largest among the economies compared for the second year
in a row. Manufacturing employment also declined in all
the other economies except Canada and Italy. The
declines were accompanied by the same or fewer average
hours worked in all the other economies except for Japan,
Taiwan, and the United Kingdom. (See tables A and B.)
Manufacturing hourly compensation and unit labor costs
Hourly compensation in manufacturing, expressed in
national currencies, increased in all but one of the
economies compared. Korea posted an increase of 13.0
percent, followed by Belgium and Japan, at over 7
percent. The U.S. increase of 4.7 percent was about
average. Only Taiwan showed a small decline. For most
economies for which historical comparisons are available,
hourly compensation increases in 2002 lagged behind their
average annual growth rates for the 1979-2002 period.
(See table B.)
Unit labor costs, expressed in national currency units,
also increased in a majority of the economies compared,
although only Japan and the Netherlands had increases in
2002 greater than their average annual rate since 1979.
The United States, Canada, and Sweden recorded declines
in unit labor costs in 2002, as their productivity growth
exceeded the hourly compensation increases. In Taiwan,
the increase in productivity and decline in hourly
compensation resulted in a 6.1 percent decline in unit
labor costs. (See tables A and B.)
To compare changes in competitiveness across economies,
the impact of exchange rate fluctuations have to be taken
into account by expressing unit labor costs in a common
monetary unit. When a foreign currency appreciates
against the U.S. dollar, more dollars must be paid in
exchange for each national currency unit. This leads to
a larger increase, or a smaller decline, in unit labor
costs converted from the foreign currency into U.S.
dollars than the corresponding change in unit labor costs
expressed in the national currency. This makes products
from that country more expensive and lessens its
competitiveness.
In 2002, the U.S. dollar depreciated against the
currencies of most economies compared, particularly
against the Norwegian krone (12.7 percent). The decline
against the euro was 5.6 percent. This depreciation
reversed a seven-year trend, when the U.S. dollar
recorded annual average appreciation against most other
currencies. Only the Japanese yen and Canadian and
Taiwanese dollars depreciated against the U.S. dollar in
2002. (See table B.)
Because of the dollar's depreciation, the unit labor
costs of all European countries and of Korea increased
more when expressed in U.S. dollars than in national
currencies. In Sweden, a krona-denominated 4.1 percent
decline in unit labor costs changed to a 2.0 percent
increase in dollar terms. The European increases were
all well above the average annual rates of increase since
1979, though, with the exception of Norway, they were
less than in the 1985-1990 period. The increase in Korean
unit labor costs, expressed in U.S. dollars, was the
largest since 1995. In both 2001 and 2002, Taiwan showed
the largest decline in unit labor costs. Unit labor
costs in dollar terms also declined in Canada. (See
tables A and B.)
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Table B. Output per hour, hourly compensation, unit labor costs, and related measures
Manufacturing, 14 countries or areas, 1979-2002
Average annual rates of change 1/
Country 1979-2002 1979-1985 1985-1990 1990-1995 1995-2000 2000-2001 2001-2002
or area
Output per hour
United States 3.5 3.5 2.4 3.3 4.5 0.4 9.2
Canada 2.5 3.6 .5 3.8 2.8 -1.8 2.8
Japan 3.6 3.5 4.3 3.3 4.1 - .1 2.7
Korea NA NA 8.2 9.7 11.0 - .8 7.2
Taiwan 5.9 5.1 7.9 5.3 5.5 6.3 6.4
Belgium 3.7 6.0 2.2 3.2 2.9 1.4 6.8
Denmark NA 2.4 .7 NA 2.0 5.0 3.4
France 4.2 5.1 3.3 4.0 4.6 3.4 2.7
Germany 2/ 2.4 2.1 2.1 3.3 2.5 .6 2.5
Italy 1.8 3.0 1.3 2.2 1.0 2.0 -1.4
Netherlands 3.0 4.6 2.2 3.5 2.5 - .3 .5
Norway 1.5 2.4 1.4 .5 1.1 2.2 1.8
Sweden 4.2 3.1 1.9 5.7 7.1 -3.0 8.2
United Kingdom 3.7 4.4 4.6 3.6 2.7 3.7 1.0
Output
United States 2.5 2.2 2.5 3.1 4.3 -6.0 1.8
Canada 2.7 2.0 1.8 2.4 5.9 -3.6 2.9
Japan 2.5 4.7 4.8 .4 2.0 -3.4 -2.0
Korea 8.8 8.3 12.2 8.4 8.1 2.1 6.3
Taiwan 6.0 8.2 7.0 5.0 5.7 -5.7 6.3
Belgium 2.1 2.6 2.5 .6 2.9 .4 1.0
Denmark 1.4 2.3 - .6 1.7 1.8 4.4 .2
France 2.1 1.6 2.5 1.1 3.5 3.0 .1
Germany 2/ .6 .2 2.3 - .7 1.0 - .2 - .2
Italy 1.5 .9 3.2 1.5 1.2 .8 - .7
Netherlands 2.0 2.0 3.1 1.8 2.6 - .9 -1.6
Norway .3 .6 -1.6 1.1 1.0 .5 - .6
Sweden 3.3 2.2 1.4 3.7 7.4 -2.8 3.4
United Kingdom .6 -1.2 3.4 .5 1.3 -1.3 -3.5
Continued on next page
-8-
Table B. Output per hour, hourly compensation, unit labor costs, and related measures
Manufacturing, 14 countries or areas, 1979-2002
Average annual rates of change 1/
Country 1979-2002 1979-1985 1985-1990 1990-1995 1995-2000 2000-2001 2001-2002
or area
Total hours
United States -1.0 -1.2 0.0 -0.1 -0.2 -6.4 -6.8
Canada .2 -1.5 1.3 -1.3 3.0 -1.8 .1
Japan -1.0 1.1 .5 -2.8 -2.0 -3.3 -4.5
Korea NA NA 3.7 -1.2 -2.6 2.9 - .8
Taiwan .0 2.9 - .8 - .3 .2 -11.3 - .1
Belgium -1.6 -3.2 .4 -2.5 - .1 -1.0 -5.5
Denmark NA - .1 -1.3 NA - .2 - .6 -3.1
France -2.0 -3.3 - .7 -2.8 -1.1 - .4 -2.6
Germany 2/ -1.8 -1.9 .2 -3.9 -1.5 - .8 -2.7
Italy - .3 -2.0 1.9 - .7 .1 -1.2 .7
Netherlands -1.0 -2.5 .9 -1.7 .0 - .6 -2.2
Norway -1.2 -1.8 -2.9 .6 - .1 -1.7 -2.4
Sweden - .9 - .8 - .5 -1.9 .3 .2 -4.5
United Kingdom -3.0 -5.3 -1.2 -3.0 -1.4 -4.8 -4.5
Employment
United States -1.1 -1.4 -0.1 -0.6 -0.1 -4.7 -6.8
Canada .2 -1.3 1.2 -1.5 2.8 - .8 .3
Japan - .6 1.2 .8 -1.6 -1.9 -2.6 -4.7
Korea NA NA 5.4 - .9 -2.5 5.2 - .2
Taiwan .7 4.1 - .5 - .3 .5 -4.5 -1.8
Belgium -1.5 -2.6 - .3 -2.2 - .7 .8 -3.6
Denmark - .7 .2 - .8 -1.2 - .5 -1.1 -2.9
France -1.4 -2.3 - .9 -2.5 - .3 1.2 -1.7
Germany 2/ -1.2 -1.1 1.1 -4.2 - .8 .4 -2.2
Italy - .7 -1.8 .3 -1.6 .1 - .3 .9
Netherlands - .8 -2.3 1.0 -1.6 .2 - .5 -2.2
Norway -1.1 -1.8 -2.7 .3 .1 -1.4 -1.1
Sweden -1.3 -1.2 - .8 -3.5 .0 1.1 -2.8
United Kingdom -2.7 -4.5 - .9 -3.0 -1.1 -4.5 -5.0
Continued on next page
-9-
Table B. Output per hour, hourly compensation, unit labor costs, and related measures
Manufacturing, 14 countries or areas, 1979-2002
Average annual rates of change 1/
Country 1979-2002 1979-1985 1985-1990 1990-1995 1995-2000 2000-2001 2001-2002
or area
Average hours
United States 0.1 0.2 0.1 0.4 -0.1 -1.8 0.0
Canada .0 - .2 .1 .3 .1 -1.0 - .2
Japan - .4 .0 - .3 -1.3 - .1 - .7 .2
Korea NA NA -1.6 - .2 - .1 -2.1 - .7
Taiwan - .7 -1.1 - .4 .0 - .3 -7.1 1.7
Belgium - .1 - .6 .7 - .3 .6 -1.7 -2.0
Denmark NA - .3 - .5 NA .3 .5 - .2
France - .6 -1.1 .1 - .3 - .8 -1.6 - .9
Germany 2/ - .6 - .8 - .9 .3 - .6 -1.2 - .5
Italy .5 - .1 1.6 .9 .0 - .9 - .2
Netherlands - .2 - .3 - .2 .0 - .2 - .1 .0
Norway - .1 .0 - .2 .3 - .2 - .3 -1.3
Sweden .5 .4 .3 1.7 .2 - .8 -1.7
United Kingdom - .4 - .8 - .3 - .1 - .3 - .3 .5
Total labor compensation in manufacturing 3/: National currency basis
United States 3.6 5.8 3.9 3.4 3.7 -4.1 -2.4
Canada 5.0 7.5 5.6 2.4 5.5 1.6 2.6
Japan 2.5 5.9 5.1 .7 -1.1 -2.5 2.3
Korea NA NA 19.9 16.8 4.1 10.2 12.0
Taiwan 8.2 15.9 10.6 6.8 4.2 -9.4 - .2
Belgium 3.1 4.7 4.0 1.3 2.0 4.4 1.5
Denmark 4.7 9.1 4.8 2.3 2.9 3.9 1.0
France 3.7 9.0 3.6 1.1 1.1 3.4 .6
Germany 2/ 3.1 4.0 5.2 2.3 1.6 2.6 - .3
Italy 7.2 13.6 8.8 4.2 2.9 2.3 3.1
Netherlands 3.1 2.4 3.9 2.8 3.4 4.6 2.8
Norway 5.4 8.0 4.7 4.0 5.0 3.7 3.5
Sweden 5.8 8.9 7.9 2.0 5.3 5.3 - .9
United Kingdom 4.5 6.3 8.1 2.5 3.2 - .3 -1.2
Continued on next page
-10-
Table B. Output per hour, hourly compensation, unit labor costs, and related measures
Manufacturing, 14 countries or areas, 1979-2002
Average annual rates of change 1/
Country 1979-2002 1979-1985 1985-1990 1990-1995 1995-2000 2000-2001 2001-2002
or area
Hourly compensation 3/: National currency basis
United States 4.6 7.2 3.9 3.5 4.0 2.4 4.7
Canada 4.8 9.1 4.2 3.7 2.5 3.4 2.4
Japan 3.6 4.7 4.6 3.6 1.0 .8 7.1
Korea NA NA 15.6 18.2 6.9 7.0 13.0
Taiwan 8.2 12.6 11.5 7.1 4.0 2.2 - .1
Belgium 4.7 8.1 3.7 3.9 2.0 5.5 7.3
Denmark NA 9.3 6.2 NA 3.1 4.5 4.2
France 5.9 12.7 4.4 4.0 2.3 3.8 3.3
Germany 2/ 5.0 6.0 5.0 6.4 3.2 3.4 2.5
Italy 7.4 15.9 6.8 4.9 2.8 3.6 2.5
Netherlands 4.1 5.1 3.0 4.5 3.3 5.2 5.1
Norway 6.6 10.0 7.8 3.4 5.2 5.5 6.0
Sweden 6.7 9.8 8.4 4.0 5.1 5.1 3.7
United Kingdom 7.8 12.2 9.4 5.7 4.7 4.8 3.4
Unit labor costs 3/: National currency basis
United States 1.1 3.6 1.4 0.2 -0.5 2.0 -4.1
Canada 2.3 5.3 3.7 - .1 - .4 5.3 - .3
Japan .0 1.1 .3 .3 -3.0 .9 4.3
Korea NA NA 6.9 7.8 -3.7 7.9 5.4
Taiwan 2.1 7.1 3.4 1.7 -1.5 -3.9 -6.1
Belgium 1.0 2.0 1.5 .7 - .9 4.0 .5
Denmark 3.3 6.7 5.4 .6 1.1 - .5 .8
France 1.6 7.3 1.1 - .1 -2.2 .4 .5
Germany 2/ 2.5 3.8 2.8 3.1 .6 2.8 .0
Italy 5.5 12.5 5.4 2.6 1.7 1.5 3.9
Netherlands 1.1 .5 .8 1.0 .8 5.5 4.5
Norway 5.1 7.4 6.4 2.9 4.0 3.2 4.2
Sweden 2.4 6.5 6.4 -1.6 -1.9 8.4 -4.1
United Kingdom 3.9 7.5 4.5 2.0 1.9 1.1 2.4
Continued on next page
-11-
Table B. Output per hour, hourly compensation, unit labor costs, and related measures
Manufacturing, 14 countries or areas, 1979-2002
Average annual rates of change 1/
Country 1979-2002 1979-1985 1985-1990 1990-1995 1995-2000 2000-2001 2001-2002
or area
Unit labor costs3/: U.S. dollar basis
United States 1.1 3.6 1.4 0.2 -0.5 2.0 -4.1
Canada 1.0 2.7 7.0 -3.3 -2.0 1.0 -1.7
Japan 2.4 - .3 10.8 9.4 -5.7 -10.5 1.3
Korea NA NA 11.1 6.0 -10.7 -5.6 8.9
Taiwan 2.3 5.3 11.8 2.0 -4.7 -11.2 -8.0
Belgium - .6 -9.3 13.8 3.3 -8.4 .9 6.1
Denmark 1.5 -5.0 17.4 2.7 -6.1 -3.3 6.5
France - .5 -5.3 11.7 1.7 -8.9 -2.6 6.2
Germany 2/ 2.0 -4.1 15.9 5.6 -6.9 - .3 5.6
Italy 1.5 -2.0 15.7 -3.5 -3.3 -1.6 9.7
Netherlands .4 -7.6 13.6 3.6 -6.9 2.3 10.4
Norway 3.0 -1.7 13.3 2.6 -2.7 1.1 17.4
Sweden -1.1 -5.2 14.7 -5.2 -6.7 -3.9 2.0
United Kingdom 2.4 -1.0 11.4 - .4 1.1 -4.0 6.9
Exchange rates 4/
United States -- -- -- -- -- -- --
Canada -1.3 -2.5 3.2 -3.2 -1.6 -4.1 -1.4
Japan 2.4 -1.5 10.5 9.1 -2.7 -11.3 -2.9
Korea -4.0 -9.2 3.9 -1.7 -7.3 -12.5 3.3
Taiwan .2 -1.7 8.2 .3 -3.3 -7.6 -2.1
Belgium -1.6 -11.1 12.2 2.5 -7.6 -3.0 5.6
Denmark -1.7 -11.0 11.4 2.0 -7.1 -2.8 5.7
France -2.1 -11.7 10.5 1.8 -6.8 -3.0 5.6
Germany 2/ - .5 -7.6 12.7 2.5 -7.5 -3.0 5.6
Italy -3.8 -12.9 9.8 -6.0 -4.9 -3.0 5.6
Netherlands - .7 -8.0 12.7 2.6 -7.6 -3.0 5.6
Norway -2.0 -8.4 6.6 - .3 -6.4 -2.0 12.7
Sweden -3.5 -11.0 7.8 -3.7 -4.9 -11.3 6.4
United Kingdom -1.5 -7.9 6.6 -2.4 - .8 -5.0 4.4
r = revised NA = not available
1/ Rates of change based on the compound 3/ Adjusted for employment taxes and
rate method. government subsidies to estimate the
actual cost to employers.
2/ Data for years before 1991 pertain to the
former West Germany. 4/ Value of foreign currency relative to
the U.S. dollar.
-12-
Trade-weighted unit labor costs
BLS constructs indexes of U.S. unit labor cost trends
relative to a trade-weighted average of unit labor cost
trends in the other economies to take account of
differences in the relative importance of foreign
economies to U.S. trade in manufactured goods. Relative
trade-weighted unit labor cost indexes are calculated on
both a national currency and a U.S. dollar basis. In
this release, the relative U.S. trade-weighted indexes
are estimated against 12 economies for which comparable
data are available over this period; the indexes
underlying this chart are shown in table C.
Chart 3 begins in 1979, a year in which U.S.
manufacturing output reached a business cycle peak.
PRINTED COPY CONTAINS CHART AT THIS POINT
Chart 3. U.S. manufacturing unit labor costs relative to 12 competitors, 1979-2002
In the chart, the solid line indicates that U.S. unit
labor costs rose faster than "competitors" costs from
1979 to 1986 on a U.S. dollar basis. In most years from
1986 to 1995, U.S. costs either rose at a slower rate
than the "competitors" costs or fell at a faster rate.
From 1996 to 1998, however, the strength of the U.S.
dollar caused relative U.S. unit labor costs to rise.
After a dip in 1999, the index of relative U.S. unit
labor costs rose in 2000 and 2001, only to dip again in
2002 with a weakening of the U.S. dollar.
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Table C. U.S. manufacturing unit labor
costs relative to 12(1) competitors, 1979-2002
Unit Labor Costs Unit Labor Costs
National Currency Basis U.S. Dollar Basis
Year Own Competitors' Own Competitors'
Index Index Ratio Index Index Ratio
1979 100.0 100.0 100.0 100.0 100.0 100.0
1980 111.4 110.4 100.9 111.4 110.1 101.2
1981 116.5 118.4 98.4 116.5 108.9 107.0
1982 124.2 126.0 98.6 124.2 104.9 118.5
1983 121.6 127.6 95.2 121.6 103.3 117.6
1984 121.0 128.3 94.3 121.0 98.0 123.4
1985 123.4 129.7 95.1 123.4 96.2 128.2
1986 128.9 135.7 95.0 128.9 122.6 105.2
1987 122.8 137.7 89.1 122.8 141.1 87.0
1988 122.5 137.6 89.0 122.5 151.9 80.7
1989 128.0 140.6 91.0 128.0 149.8 85.4
1990 132.4 146.6 90.3 132.4 162.3 81.6
1991 138.0 152.2 90.7 138.0 171.6 80.4
1992 141.3 155.6 90.8 141.3 179.6 78.7
1993 142.3 156.2 91.1 142.3 175.9 80.9
1994 139.2 153.6 90.6 139.2 175.8 79.1
1995 134.0 153.0 87.6 134.0 185.1 72.4
1996 132.1 154.0 85.8 132.1 176.9 74.7
1997 129.9 152.0 85.5 129.9 162.2 80.1
1998 131.2 153.7 85.4 131.2 155.3 84.5
1999 129.1 151.1 85.4 129.1 157.4 82.0
2000 130.4 145.9 89.4 130.4 147.7 88.3
2001 133.0 149.2 89.1 133.0 141.2 94.2
2002 127.5 151.2 84.3 127.5 144.0 88.5
(1) Korean data begin with 1985 and have been omitted from this table.
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Technical Notes
The comparisons in this release are based on data available
to BLS as of January 2004.
Labor productivity is defined as real output per hour
worked. Although the labor productivity measure presented in
this release relates output to the hours worked of persons
employed in manufacturing, it does not measure the specific
contributions of labor as a single factor of production.
Rather, it reflects the joint effects of many influences,
including new technology, capital investment, capacity
utilization, energy use, and managerial skills, as well as
the skills and efforts of the workforce.
Unit labor costs are defined as the cost of labor input
required to produce one unit of output. They are computed as
compensation in nominal terms divided by real output.
The Bureau of Labor Statistics constructs trends of
manufacturing labor productivity, hourly compensation costs,
and unit labor costs from three basic aggregate measures -
output, total labor hours, and total compensation. The hours
and compensation measures refer to employees (wage and
salary earners) in Belgium, Denmark, and Taiwan. For all
other economies, the measures refer to all employed persons,
including employees, self-employed persons, and unpaid
family workers. For all of the economies, the term "hours"
refers to hours worked.
In general, the measures relate to total manufacturing as
defined by the International Standard Industrial
Classification (ISIC). However, the measures for Denmark
include mining and exclude manufacturing handicrafts from
1950 to 1966, and the measures for France include parts of
mining. Data for Canada are in accordance with the North
American Industry Classification System (NAICS 97) from 1997
forward and, prior to 1997, with the Canadian Standard
Industrial Classification (SIC 80). The change to NAICS
reduced Canadian manufacturing employment and hours by about
8 percent. U.S. manufacturing output in this release is
based on the 1987 Standard Industrial Classification (SIC).
The next regular U.S. Department of Commerce, Bureau of
Economic Analysis publication (scheduled for June 2004) of
U.S. manufacturing output, for the period 1998-2002 will be
on a NAICS basis. Likewise, in the present release, U.S.
data for manufacturing employment, hours worked, and labor
compensation are based on the 1987 SIC, but will be based on
NAICS in the next and future releases.
For most countries, the data for the most recent years are
based on the United Nations System of National Accounts 1993
(SNA 93) or its sub-system, the European System of
Integrated National Accounts (ESA 95). For some countries,
data were compiled according to previously used systems.
Output. For most countries, the output measures are real
value added in manufacturing from national accounts.
However, output for Japan prior to 1970, and for the
Netherlands prior to 1960, are indexes of industrial
production. The manufacturing value added measures for the
United Kingdom are essentially identical to their indexes of
industrial production.
The output measure for manufacturing in the United States is
the chain-weighted index of real gross product originating
(deflated value added), introduced by the Bureau
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of Economic Analysis (BEA) of the U.S. Department of
Commerce in August 1996. These value added output data for
U.S. manufacturing industries are not available for years
prior to 1977. For more information on the U.S. measure,
see Sherlene K.S. Lum, Brian C. Moyer, and Robert E.
Yuskavage, "Improved Estimates of Gross Product by Industry
for 1947-98," Survey of Current Business, June 2000, pp. 24-
38.
The U.S. output series used for international comparisons
differs from the manufacturing series that BLS publishes as
part of its official major sector productivity and costs
measures for the United States. While both series are based
on annually-changing price weights, the international
comparisons program uses a value added output concept, while
the major sector series is on a sectoral output basis and
begins with 1949. Sectoral output is gross output less
intrasector sales and transfers. For information on
sectoral output, see William Gullickson, "Measurement of
productivity growth in U.S. manufacturing," Monthly Labor
Review, July 1995, pp. 13-28. The official U.S. major
sector productivity and costs measures can be found at
http://www.bls.gov/lpc/home.htm.
Value added measures have been used for the international
comparisons series because the data are more readily
available from the countries' national accounts, whereas
sectoral output would require a complex estimation
procedure. Also, although BLS has determined that sectoral
output is the correct concept for U.S. measures of
productivity, there are other considerations that may make
value added a better concept for international comparisons
of labor productivity, such as differences among countries
in the extent of vertical integration of industries.
Estimation of manufacturing real output using chain-weighted
indexes, as recommended by SNA 93, is becoming prevalent.
However, many earlier time periods within the historical
real output series have been estimated using fixed price
weights, with the weights updated periodically (for example,
every 5 or 10 years).
Measures of real output also may differ among countries
because of different approaches to estimating the prices of
high-technology products like computers and, in general, of
products that undergo rapid quality change.
Labor Input. For the United States, the hours worked data
are taken from the BLS major sector productivity program.
The aggregate hours worked series used for France (from 1970
forward), Norway, Sweden, and Canada are series published
with the national accounts. For the former West Germany
after 1959 and Germany from 1991, BLS uses aggregate hours
worked, which were developed by a research institute of the
German Ministry of Labor for use with the national accounts
employment figures. For the United Kingdom from 1992, an
annual index of total manufacturing hours is used. For all
other countries, the U.K. before 1992, and the former West
Germany before 1959, BLS constructs its own estimates of
aggregate hours, using employment figures published with the
national accounts, or other comprehensive employment series,
and estimates of average annual hours worked. The Italian
hours worked series is based on estimates by the Bank of
Italy. Denmark released a new hours worked series beginning
with 1995. The previous series ends with 1993, and no hours
measure is available for 1994. Because of the break in
series, no historic trends involving hours can be calculated
for periods that include 1994.
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Compensation (Labor Cost). The compensation measures are
from national accounts data. Compensation includes employer
expenditures for legally required insurance programs and
contractual and private benefit plans, in addition to all
payments made in cash or in kind directly to employees. For
Canada, France, and Sweden, compensation is increased to
account for important taxes on payroll or employment. For
the United Kingdom, compensation is reduced between 1967 and
1991 to account for subsidies. When data for the self-
employed are not available, total compensation is estimated
by assuming the same hourly compensation for self-employed
and employees. Real compensation for the United States is
derived using the Consumer Price Index research series (CPI-
U-RS).
Data for Germany. German data pertain to unified Germany
from 1991 forward and to the former West Germany for prior
years. The data series are linked in 1991. West German
estimates end with 1998 and have not been revised by BLS
since the news release USDL 99-235, on Aug. 27, 1999.
Current Indicators. The measures for recent years may be
based on current indicators of output (such as industrial
production indexes), employment, average hours, and hourly
compensation until national accounts and other statistics,
normally used for the long-term measures, become available.
Trade-Weighted Measures. The trade weights for Canada,
Japan, and the European countries were obtained by re-
scaling a series of weights, developed by the International
Monetary Fund, based on average trade flows over the 1989-91
period. These weights are based on aggregate trade data for
total manufacturing and take account of both bilateral trade
and the relative importance of "third country" markets. The
1989-91 weights do not include Taiwan. BLS developed weights
for Taiwan by using data from an earlier study from the
International Monetary Fund and other sources. The weight
used for Germany is based on the trade weight of the former
West Germany.
The following weights were used for the entire period for
which trade-weighted unit labor cost measures are produced:
Country Weight Country Weight
Canada 25.31 Germany 11.61
Japan 30.57 Italy 4.60
Taiwan 5.79 Netherlands 2.25
Belgium 2.14 Norway 0.48
Denmark 0.48 Sweden 1.89
France 5.90 United Kingdom 8.99
Level Comparisons. The BLS measures are limited to trend
comparisons. BLS does not prepare level comparisons of
manufacturing productivity and unit labor costs because of
data limitations and technical problems in comparing the
levels of manufacturing output among countries. Each country
measures manufacturing output in its own currency units. To
compare outputs among countries, a common unit of measure is
needed. Market exchange rates are not suitable as a basis
for comparing output levels. What is needed are purchasing
power parities, which are the number of foreign currency
-17-
units required to buy goods and services equivalent to what
can be bought with one unit of U.S. currency.
Purchasing power parities are available for total gross
domestic product (GDP) from the Organization for Economic
Cooperation and Development (OECD). However, these
parities are derived for expenditures made by consumers,
business, and government for goods and services - not for
value added by industry. Therefore, they do not provide
purchasing power parities by industry. The parities
developed for total GDP are not suitable for each
component industry, such as manufacturing.
European exchange rates. On Jan. 1, 1999, 11 European
countries joined the European Monetary Union (EMU).
Greece joined on Jan. 1, 2001. The euro, the official
currency of the EMU, was established at fixed conversion
rates to the previous national currencies of EMU members.
Data on manufacturing value added and labor compensation
for euro-area countries are now reported in euros.
Exchange rates between the previous national currencies
of euro-area countries and the U.S. dollar are no longer
reported; only the exchange rate between the euro and the
U.S. dollar is available.
In order to maintain historical continuity of data
series, data for euro-area countries for years before
1999 have been linked to the euro-denominated series by
applying the fixed euro/national currency conversion
rates. For countries and years where output,
compensation and exchange rates are converted from
national currency units into euros, the following fixed
conversion rates were used:
1 euro equals: 40.3399 Belgian francs 1936.27 Italian lire
6.55957 French francs 2.20371 Netherlands guilders
1.95583 German marks
The currency exchange rates cited in this publication are
annual averages of daily buying rates in New York City.